AIA Group: Business Highlights Show China New Business Value Growth Better Than Expected

AIA Group’s financial highlights showed third-quarter value of new business, or VNB, on an actual exchange-rate basis grew strongly at 34% year on year from 15% in the second quarter. Cumulative nine-month VNB growth climbed to 33% from 32% in the first half. We increase our 2023 projections for annualized new premium, and VNB growth by 3 and 5 percentage points, respectively, to 45% and 30%, following the higher-than-expected third-quarter growth. We keep our HKD 96 fair value estimate and we think AIA remains on track to deliver our 2023 growth forecasts for embedded value, or EV, and operating profit at 12% and 2%, respectively, year on year. AIA is trading at 1.4 times 2024 EV equity per share and we believe the stock is undervalued. The results confirm our view that concerns about AIA China’s slowing VNB growth and potential margin dilution from increased sales of saving products were overblown. We continue to expect AIA’s premier agency force and ongoing mainland China expansion plan to support a better-than-peer long-term growth.